Do You Need to File 1099s?

If you paid more than $600 to any individual, LLC or partnership for rent or services provided to your business during 2011, then you must send that entity a 1099. You must also file all copies of Forms 1099 with the IRS, along with cover sheet, Form 1096 by February 29, 2012.

How Can I Easily Determine Which Vendor Will Need a 1099?

Your QuickBooks file is the perfect tool so you can determine if you need to file a 1099 to any particular vendor. By looking at your Profit & Loss report for 2011, you want to pay attention to all service and rent categories such as:

· Advertising & Promotion

· Misc.

· Outside Service

· Legal Fees

· Accounting Fees

· Professional Fees

· Repair Service

· Rent/CAM Charges – this one goes under “rent” on 1099. not non-employee compensation

· Storage – same as above

When you find those categories, click on the amount to review the detail. This way you can identify which vendors received more than $600. If any vendor’s name ends in “Inc, Co., Corp. or Corporation,” then there is no need to issue a 1099. If the company is a C-Corp or an S-Corp, they are excluded from receipt of 1099s. For example, eeCPA is an S-Corp, so no need to send us a 1099!

What information do you need from the service provider?
You will need the full name of the individual or business, the address and the individual or business' Taxpayer (Employer) Identification Number, along with the amount that you paid to that provider during 2011. All of this information can be obtained by sending your vendors Form W-9. Click here to obtain this form.

Do you need help in preparing your Forms 1099?
eeCPA is here to help...
1. We will gather the information from you.
2. We will prepare all of the forms and mail them to the recipients by the deadline.
3. We will file the government forms electronically on your behalf.
4. We will send you copies of all of the forms and a summary report once the filings have been completed.

If you provide us with the information that we need, we will charge you just $25 per 1099.

If we need to gather the information from your accounting files and determine the filing requirements, then we will charge you based upon our standard hourly rates.

Why should you file Forms 1099 timely?
The #1 reason to file your Forms 1099 timely is to preserve the deductibility of your expenses.

Secondly, you want to file the 1099's timely to avoid the penalties for late and/or incomplete filings. The penalties range from $30-$100 per 1099 Form if not filed, filed late or incorrectly filed.

Tips to make the 1099 process less painless for 2012...
Have all of your service providers complete a Form W-9 prior to making payment to them. That way they have incentive to complete and return the form to you, and you have all of the information that you need when it comes time to prepare your 1099s for 2012.

How to Take Advantage of AZ Tax Credits

Do you pay even $1 of tax to the State of Arizona? If the answer is yes, then you can choose to pledge those dollars directly to education or to charitable organizations that assist the working poor. There are 2 types of Arizona Tax Credits that support the funding of education in Arizona. There is the private school tuition credit and the public school fee credit. Contributions for private school tuition tax credits can be made through April 16, 2012. If you make a contribution by April 16, 2012, you have the option of using it as a tax credit on either your 2011 or 2012 return.Here is the Arizona Department of Revenue’s website for details on how you can take advantage of these tax credits.

Furthermore, there are a number of charities that depend on donations and provide programs throughout our community. Many of these organizations are really struggling right now, and you can help them by taking advantage of the Charitable Tax Credit and saving on your 2011 taxes. (Warning - Please note that this credit is only available to individual taxpayers that itemize their deductions. If you take the standard deduction, then you may not claim the credit!)

In sum, every Arizona Resident is eligible to take the following maximum annual charitable/education credits:

Single/Head of Household

Private School $500

Public School $200

Charitable Organization $200

Total Available $900

Married Filing Joint

Private School $1000

Public School $400

Charitable Organization $400

Total Available $1800

Oftentimes, if you have children in public school, you will be paying fees for extracurricular activities or special programs. Keep track of those fees, since they will most likely qualify for the credit and reduce your tax bill.

If someone close to you is attending a private school (other than your child), you can make a specific tax credit donation to the private school that will benefit that person specifically, if they qualify to receive a scholarship. You would need to contact the school directly to make arrangements for this type of donation.

Please note that when preparing your tax returns, we will need the following information about your tax credit donation: Payee, date donation made, amount of donation.

Unlike other charitable donations which merely provide deductions that can save you up to 5.4% on your tax bill, a tax credit saves you 100% of the tax. That is for every $1 you spend on a tax credit donation, you may subtract $1 from your Arizona Tax Bill.

If you are unsure of where to make your contribution, we recommend Quality Interactive Montessori School or Foothills Academy. Click on this link for the Quality Interactive donation form and this link for the Foothills form.

Happy Holidays!

We would like to thank you for the opportunity to serve you this past year and look forward to a very successful 2012! We would like to wish you a very happy and safe holiday. Please note that our office will be closed December 26 through December 30 in observation of the Christmas and New Year’s holidays.

Get Ready for the 2011 Tax Season!

Now that 2011 is finally coming to a close, it is the perfect time to start thinking about your tax preparation. Remember returns are scheduled on a first come, first serve basis so the earlier you contact us, the sooner you could receive your refunds! Please pre-schedule your appointments in January to discuss your tax preparation.

How to Respond to the IRS

The Internal Revenue Service sends millions of letters and notices to taxpayers each year; certainly, enough that the Post Office should be thriving. If you received a letter, there is no need to worry. Just follow these steps:

· Call eeCPA, not the IRS. When you receive the notice, please notify our office first. If you contact the IRS, you may unknowingly do a disservice to your case. Please know that this is an issue that should be handled by professionals.

· Don’t worry! The IRS sends notices for a myriad of reasons i.e. assessment of additional tax, assessment of penalties, request for additional information to substantiate claims on your return, etc. Most of the issues can be resolved with further explanation to the IRS.

o If you do receive a notice, please note that our response is a service outside of our tax preparation engagement.

· Send us a copy of the letter right away. It is absolutely critical to respond to the IRS timely. Any delay in response can impact the resolution of your case. Please consider that it does take time to gather information and organize the substantiation before presenting it to the IRS.

Year-End Checklist

The end of the year is quickly approaching, but don’t let the year-end tasks ruin your holiday cheer! Here is a quick checklist of items to complete so you can successfully wrap up 2011 and prepare for 2012.

ü Get your books in order. If your bookkeeping is not up to date, you cannot get a realistic picture of your business’s performance in 2011. With this not done, you cannot determine any last-minute strategies before year-end.

ü Review your Profit & Loss. Where do you stand for 2011? Did you profit more than you expected? Now would be a great time to make any major purchases before the year’s end to take advantage of depreciation expenses.

ü Prepare for 1099s & W-2s. The final day to mail W-2s to your employees and 1099s to your vendors is January 31, 2011. The last day to file Forms 1096 and 1099 by mail is February 28, 2011 and if filing electronically, March 31, 2011. Don’t wait until the last minute to file! Be sure to verify vendor information and collect W-9s if you have not done so previously. Please remember that the expanded 1099 requirements identified in the 2010 Small Business Jobs Act and health care reform bill were repealed. You must issue Form 1099 to any individual, LLC, or partnership if you paid more than $600 in rent or services during 2011.

ü Year-end bonuses and gift-giving. After reviewing your profit and loss, you can determine whether it would be advantageous to issue bonuses and purchase gifts in 2011 or 2012.

ü Fringe benefits. Take a look at possible benefits to extend to your employees (health and life insurance, transportation subsidies, educational reimbursements, etc). You might be able to take advantage of additional expenses.

ü Don’t forget about your contributions! If you are looking to offset your income, there are plenty of options available. You could consider the Arizona Tax Credits for education and the working poor. By making a contribution to qualifying schools and charities, you can claim a dollar for dollar credit of up to $900 for single/head of household or $1,800 for married filing joint. If you are still looking for a specific organization, you might like to consider Quality Interactive Montessori School or Foothills Academy. Click on this link for the Quality Interactive donation form and this link for the Foothills donation form. Don’t forget about your retirement plan contributions, too!

ü Plan for 2012. Now that you have examined 2011, look forward to 2012. Set goals for the New Year and prepare a plan of action!

Gas Prices Are Up and So Are Deductions:Saving on your Business Auto, Light Truck or Van in 2011

Buying a new vehicle?

Although we are already half way through 2011, you can still take advantage of plenty of write-offs and deductions when it comes to your business autos this year! The IRS has just released the new bonus depreciation dollar caps for business autos bought and put into service in 2011.

Under the Small Business Jobs Act passed in 2010, first- year luxury auto dollar limits increased, providing for larger depreciation deductions. Besides being able to write off more for your business auto, bonus depreciation was also made an option: you can get up to 100% bonus depreciation for the first year, providing that you are buying a NEW vehicle.

Under the new Code Sec. 280F, you can write off up to $8,000 more on your business luxury auto in 2011. The maximum limits for depreciation deduction are the same as those the IRS issued in 2010, but the dollar limits have increased by $100 for the first three years for light trucks and vans. For business luxury-auto owners, bonus depreciation in the first year is still a way to save!

If you’re wondering whether or not you are eligible for bonus depreciation and higher caps on the amount of depreciation you can deduct from your taxes each year, check out this flowchart!

Standard Mileage Rates are Up

Effective July 1, 2011, the IRS has increased the standard mileage rate from 51 cents per mile for business use to 55.5 cents per mile (due to the rapid rise in fuel prices!)

The medical/moving mileage rate has also increased from 19 cents per mile to 23.5 cents per mile, effective July 1, 2011.

Thus, it would be a good idea to take your odometer reading this week! We want to be sure that you get the maximum deduction. If you want us to keep track for you for your 2011 tax return filing, please just shoot Megan (megan@eecpa.com) an email to let her know what your odometer reading is!